Case study: Bill – Managing cash flow for a Canadian blue-collar entrepreneur

Profile overview

  • Name: Bill
  • Age: 48
  • Business: Owner of a construction company specializing in infrastructure projects in British Columbia
  • Revenue: $5M–$10M annually
  • Business model: Subcontracting for large government-funded projects
  • Challenges: Irregular cash flow due to project-based payments, reliance on large accounts receivable, significant operational costs
  • Goals:
    • Maintain smooth cash flow to meet payroll and operational costs.
    • Set aside funds for growth opportunities.
    • Create a personal financial safety net to diversify from business risks.

Personal financial planning

1. Wealth diversification

  • Invest outside the business: Allocate surplus cash into personal investment accounts (RRSPs, TFSAs, and non-registered accounts).
  • Insurance: Purchase key-person insurance and critical illness insurance to protect against unexpected disruptions. 

2. Retirement planning

  • Corporate investments: Use the corporation to invest in low-tax, income-generating assets for retirement.
  • Income splitting: Pay family members as employees or shareholders to distribute income tax-efficiently.

3. Succession planning

  • Develop a formal succession plan and consider transitioning ownership to a family member or selling to a larger contractor.